Foreign investors booked net buy of Rp366.64 billion on Wednesday (July 29), after booking net sell of more than Rp1 trillion in the past 2 days due to the regional and global market downturn—mainly in view of China crash. As of yesterday, foreign investors’ net buy in local stocks reached Rp3.23 trillion, a sharp drop from its peak of Rp11.71 trillion in March 6, 2015.
But foreign investors did not really pull out of Indonesia, they’ve only switched to investment in bonds. As of June 18, 2015, net capital inflow reached Rp518.76 trillion. Foreign investors hold 38.76% of government bonds with total issue of Rp1,338 trillion.
Foreign investors opt to switch to bonds from stocks as the Indonesian bonds prices are in decline though it offers high yields. It’s been a good time for investors to invest in Indonesian bonds amid concern on Greek debt crisis.
Bank Indonesia maintains its benchmark BI Rate at 7.5%, and this has attracted more foreign investment in government bonds. Of course, the bond market will be more liquid, but there are those who might be concern on the stability of the rupiah should one day foreign investors decide to pull out from the bond market.
As of July 8, 2015, the government of Indonesia has issued rupiah bonds with the total value of Rp1,199 trillion while dollar bonds amounted US$32.69 billion (equivalent Rp436.28 trillion). While bonds in yen and euro denomination reached Rp16.93 trillion and Rp14.67 trillion. The total government bond issued reached Rp1,667 trillion.
The government’s Islamic (syariah) bonds reached Rp251.79 trillion, making the total tradable securities (bonds) reach Rp1,919 trillion. The government’s non tradable securities, meanwhile, amounted to Rp263.51 trillion, bringing government bonds to Rp2,182 trillion in total. The government targets to issue rupiah bonds of Rp244.13 trillion this year and global bonds of Rp207 trillion.
The Investment Coordinating Board (BKPM) reveals that Investment in Indonesia has entered a high and sustainable level. From the investment realization data between the period of 2010 to June 2015, there are more proportions of new investment projects, compared to the expansion investment projects.
It is recorded that the proportion of new investment projects reached 60.2%, while the expansion of investment project reached 39.8%. This indicates that, besides increasing production capacity of the existing investment, investment for new industry and production in Indonesia increased as well.
By Yohannes Obor
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